Constant Elasticity of Substitution CES Production Function

A type of production function having, in the case of two inputs, the form:

Y = A[aK P+piP ](1/p), where a and p are constants; A is a variable broadly representing 'technology' and K and L are capital and labour services, respectively; p is constant and is a measure of the substitutability of labour for capital services or vice versa. The elasticity of substitution (a) is 1 / (1 + p). Since p is constant, then so is a; hence the name for this type of production function. If p = 0 then the function becomes a Cobb-Douglas production function and a = 1.

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